Retailing

10/24/2014

E-commerce is growing around the world. In fact, global online purchase intention rates doubled—in some cases tripled—between 2011 and 2014 across more than half of 22 categories measured by Nielsen. But not all age groups are shopping online to the same degree. And the age group that has grown up in the digital era—Millennials (age 21-34)—is leading the way.

Millennials comprise at least half of all respondents who plan to make an online purchase across every product category measured in Nielsen’s Global Survey of E-commerce. Baby supplies, personal care items, toys/dolls and alcoholic drinks garner the most significant share of Millennial online purchase intenders.

MILLENNIALS COMPRISE MORE THAN HALF OF ALL RESPONDENTS WHO PLAN TO MAKE AN ONLINE PURCHASE IN THE NEXT SIX MONTHS

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OLDER GENERATIONS SHOP, TOO

But don’t count older generations out. They represent a sizeable 40% share of online purchase intenders. But reaching the older age set is much more fragmented territory than with their younger counterparts. As can be expected, the older the age, the greater the decline in online shopping intent. Globally, Generation X (age 35-49) respondents comprise about 28% of those willing to make a purchase online, and Baby Boomers (age 50-64) make up about 10%. The Silent Generation (age 65+) contributes roughly 2%. The youngest age group, Generation Z (under age 20), represents about 7% of those who intend to purchase online.

John Burbank, president of strategic initiatives, Nielsen says.

“While the generational mix of online shoppers currently skew younger, attention to the needs of all segments should be considered when developing outreach plans. Tomorrow’s highest purchase-power consumers are ones who skew much higher for digital shopping. As the population ages, greater percentages of consumers will be connected and online prominence will continue to grow. Building trust at the onset is the foundation for sustaining lifetime loyalty among shoppers.”

DEVICE DIFFERENTIAL

Beyond the generational breakdown of who’s shopping online, brands should also consider the devices consumers use to shop. With a plethora of Internet-connected devices to choose from, there’s no shortage of ways for consumers to browse and buy online. And the device of choice is decidedly different around the world.

Computers are the largely favored device for online browsing and buying among respondents in all regions, but mobile phones are a close second pick for respondents in the Middle East/Africa region and growing in prominence in Asia-Pacific and Latin America. In developing markets, mobile is often the first-access device to the Internet. Tablets—which have become more popular since the 2010 introduction of Apple’s iPad—are used by nearly one-third (31%) of global respondents for online shopping. While tablets are currently less popular than other devices for shopping online, their portability and large-screen features are conducive to E-commerce. As penetration of these devices continues to grow, so too will online shopping usage.

06/30/2014

“It is not a coffee shop, it is not an office. But if you are a mobile worker, it is something much better than both things together.”

More people are working remotely than ever before, which is bad news for coffee shops. Once the province of college students and stoned poets, suddenly they’re teeming with everyone from copywriters to pushy corporate types willing to raise fisticuffs over a free electrical outlet. What’s a cafe owner to do?

You could ban laptops -- the favored route of New York coffee houses nowadays -- or you could make the cafe more conducive to work. That’s the approach at Urban Station in Buenos Aires's hipsterish Palermo Soho district. With copious desks, conference rooms, and electrical outlets in spades, the place feels like a trendy workplace that happens to serve coffee and croissants. From the company press release:

“It is not a coffee shop, it is not an office. But if you are a mobile worker, it is something much better than both things together.”

So how does Urban Station make money? It rents desks. We don’t know the exact pricetag but they tell us it’s “less than a promotional breakfast in any Palermo bar.” The conventional wisdom is that charging for anything in a cafe is a bad idea; that people won’t even pay for wireless, let alone a seat.Urban Station’s trick is to throw in a raft of perks: Wi-Fi channels; food and drink included in the cost of the hour; printers; fax machines; scanners; lockers; and even a couple of bikes you can bang around on when you need a break.

There’s a real and growing market for this sort of thing. Seventeen million to 26 million people work remotely at least some of the time depending on how you calculate it. And the figure will only swell as companies look to cut costs and workers increasingly eschew desktop computers for mobile technology. Freelancers and part-timers already spend hundreds of dollars a month -- or more -- on co-work spaces. Urban Station’s the same idea, but with free food.

One quibble: The design, while cheery, feels a tad unpolished. (A green futon with purple earplug tables? This is not a Deee-Lite music video, people.) Corporations are always prettying their offices, then holding them up as company billboards; if Urban Station is going to be the workplace of the future, it might wanna do the same.

COMMENTARY: I love the Urban Station office cafe concept very much. To my knowledge, I don't believe we have anything similar in the U.S.

I don't believe they are going to get a lot of college students, who spend very little at cafe's offering free WIFI, and very often bring their own food, and tend to hog the tables for hours on end. Many cafe's in the U.S. have gone the other way, and stopped offering WIFI in order to discourage these practices.

Urban Station's concept provides a lot of value-added features, offering an environment designed specifically for the mobile office worker. Instead of tables, they are more like workstations. Patrons pay for the food and beverage and for actual spent working at their "workstation".

This is a very cool idea, but Urban Station does did not divulge whether they are actually making any money with that concept. Just the same, I sent off for some information.

06/16/2014

When I worked at Columbia House, the music club company, our best offer was "Buy 1, Get 1 Free," not "2 for the Price of 1" or "Get 2 at half price."

Why did we use "Buy 1, Get 1 Free"? Because it was more enticing to our customers, even though it's the same as "2 for the price of 1" or "Get 2 at half price." We always used this offer. Because it worked! It was our base offer for retaining customers, to which we often added other deals.

We tested this offer over and over and it always yielded the best results in terms of customer lifetime value (CLV): i.e., the amount of revenue that a customer yields over time; minus the cost of product, fulfillment, and shipping; plus the cost to market to that customer. CLV also adjusts for the time value of money.

The reality is that free is never free for the marketer. There's always an expense that has to be paid, even if it's not paid by the customer. Moreover, that cost is often higher than marketer anticipates.

At Columbia House we were lucky to have a very high product margin: Our cost was significantly less than the fully loaded cost of the product. We covered the CD cost by charging additional shipping. It was still a great deal for our customers, because they got a full-price CD for free. From our perspective, the offer worked because we covered our product costs.

By contrast, even though customers thought that our shipping and handling charges were high, those charges never fully covered the cost of getting the CD from our warehouse to their homes—which included the costs for order processing and fulfillment, in addition to the postage.

Our finance team spent a lot of time each year figuring out those various costs, since they were used in every aspect of our marketing promotions.

Four Types of Free

Free offerings generally fall into one of four categories.Before making a free offer, it's critical to ensure that it appeals to your target audience.

Then calculate the costs associated with your "free" offer.Each option has specific costs associated with it.

1. Product

Free products are the easiest free offers to understand. Each giveaway is a tangible item, such as a small sample of your product or a related product.

The marketing goal is to get customers to buy more from your firm in the form of new or related product.

Free-product costs include product and packaging, and fulfillment and shipping to get it to the customer. Note: when the sample is included with an existing product, the incremental packaging and shipping costs are lower.

Negatives: Many prospects just want the freebie and aren't loyal. Also, if you give prospects too much of a freebie, they may not need to purchase as much of the product.

2. Content

Content is a less tangible free offering. It's often used to entice customers to purchase from B2B organizations. The information is delivered in the form of a research report, e-book, or webinar.

The marketing goal is to acquire prospect contact details, especially for B2B companies, where more information is needed attract customers for high-priced, high-consideration products.

Free-content costs include the cost of content creation (including the design) and distribution via online or offline channels, as well as related marketing.

Negatives: Many prospects seek only information that's available for free.

3. Time

Time is another intangible offering, since it can be difficult to show its value to a prospect. It often takes the form of a free consultation to persuade a prospect to use your services or to reduce risk by providing help via an 800 number.

The marketing goal is to acquire prospect contact details, especially for B2B.

Free-time costs include the cost of your time and that of your employees. If you use time as your free giveaway, be very clear about the amount of time you're giving. Don't be afraid to set boundaries. Ironically, time is the most scarce resource any person has. Unfortunately, it's difficult to measure. Without having a timer and putting a hard stop, many solopreneurs tend to giveaway their time in the form of free advice.

Negatives: Many prospects are not willing or able to pay, and the supplier of the time may be enticed to contribute more free time in hopes of a bigger project.

4. Shipping and handling

Customers tend to prefer free shipping and handling to other "free" giveaways. In part, free shipping and handling is an enticement, since customers know what a product will cost them. Of course, this offer makes no sense if you're selling heavy products or ones that require special treatment.

The marketing goal is to get prospects to buy. This approach is particularly important if prospects are checking prices from a competitor's retail establishment.

Free-shipping-and-handling costs include order fulfillment (getting from the order through to the shipping) and the price of postage or shipping.

Negatives: Once you start to offer free shipping and handling, customers tend to expect it. They will wait for you to offer it again.

As you can see, each of those "free" offerings has costs.

How Do You Calculate the Cost of Free?

When you offer customers something for free, there's a real cost to you. It's critical to calculate that expense in advance to determine whether you can afford to make the offer.

Once you're sure that you can afford your giveaway, you need to determine how many prospects or customers you are willing to accommodate. (For some offerings, such as content, the number of prospects isn't limited.)

Here's the formula for determining the cost of free (note: not all of the variables apply to every offering):

Cost of Free per Unit = (Total cost of free) / (Number of units given away)

Components:

Free costs depend on the giveaway being offered. Include all of the costs that apply to your specific offering. When time is involved, calculate the number of hours and multiply that by the person's hourly rate.

Marketing costs consist of the cost of the marketing related to your giveaway, including content and related communications.

Number of units is the number of people who get a free item or free shipping or those who download a whitepaper, etc.

A Final Word

Many firms think that it's necessary to give away free stuff to attract and build an audience. Before you make that assumption, check what your competitors are doing.

When choosing a free giveaway, make sure that it's appropriate relative to your audience and the profitability of your offering. Then determine what it'll actually cost you before you run your campaign!

When using products or free shipping as giveaways, it's relatively easy to calculate the costs, since they're tangible. With less-tangible offerings, it's easy to underestimate the true cost of free.

What has your experience been with offering free giveaways?

COMMENTARY: According to freight and parcel auditing leader AFS, free shipping is by far (49% of consumers polled) the online shopping incentive that consumers consider most valuable when considering a product offering.

05/10/2014

Millennials are increasingly skipping trips to the store to make their purchases online, and now some retailers are fighting back with innovative in-person experiences.

Though Millennials still prefer to shop for many things in person—76% would prefer to shop for casual clothing in-store, and 57% would prefer to shop for home accessories in-store—convenience, among other factors, has clearly been shifting them away from stores and into online shopping. Some categories are already decidedly online purchases in their minds: 61% would prefer to shop for electronics online. At the same time, 51% say they would rather make an inexpensive purchase online than in-store,which indicates that even more retail categories could shift over to online buying for the generation.

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While older Millennials remember the heyday of brick-and-mortar shopping, younger Millennials are growing up in a time when a trip to the mall seems almost retro. In fact, galleries of images of “dead malls”are objects of fascination online, and dead mall Facebook groups even exist to chart the rise in abandoned (post-apocalyptic looking) malls across the country. The next generation will have even less of a connection to the idea of shopping as an in-person event.

It makes sense that retailers would attempt to lure in the generation known for craving experiences by making in-store visits more unique and by adding new elements beyond the racks and registers. Lately, some brick-and-mortar locations have been thinking outside the box to draw young consumers into stores. In March, Uniqlo—which is planning a major U.S. expansion and is already aiming to stand out to Millennials by being “the anti-fast fashion” chain—transformed the second floor of their New York flagship into a concept they’re calling SPRZ NY (Surprise New York). The gallery-like space features products made in collaboration with the Museum of Modern Art—each item corresponds with a piece of art in the museums collections, with a dedicated micro-site providing a lesson on the art and artist. SPRZ also includes an in-store Starbucks, making them the first specialty retailer to include the coffee giant chain in a location.

Uniqlo is not the only retailer amping up the brick-and-mortar experience with added bells, whistles, and dining options. Urban Outfitters recently launched a concept store in Williamsburg Brooklyn called Space Ninety 8 to create a more local and unique shopping location that offers more than your average Urban products. The retailer has been losing ground with Millennials and Space Ninety 8 is a clear effort to charm the generation. The location is a five-floor warehouse, with each floor dedicated to a unique retail approach. The first floor, Market Space, is completely dedicated to local designers, other floors include music-dedicated areas that sell records, record players, and books, a bar and the restaurant The Gorbals live on the upper floors, and the rooftop is dedicated to open seating and a view of the Manhattan Skyline.

But will creative brick and mortar approaches be enough to draw them in? While we’ll likely never return to the halcyon days of mall culture, it’s possible that these collaborations between retailers and creative enterprises will bring Millennials into stores. However, until more Millennials are on steady financial ground, they might be more interested in price tags than experiential retail. When we asked the importance of various factors when deciding where to shop in-store, 80% named low prices.

COMMENTARY: Millennials are not angst-filled, skinny-jeans-wearing, side-swept-bangs-sporting hipsters. A survey conducted by Mooslyvania, an independent digital advertising agency, refutes the most common myths associated with this generation and unveils a treasure trove of data on what really motivates them in how they think, shop, buy and continue purchasing their favorite brands.

While there's no cookie cutter recipe for defining a Millennial, the 2014 Moose Millennial Study Data can help marketers eager to please this generation – defined as anyone between the ages of 13-33 – better understand how to connect and create a long term friendship with them. Millennials in general account for nearly $1.3 trillion in consumer spending and spend the second most amount of time of any generation online – 87 percent as much as Gen X'ers.

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Overall, Millennials identify with themselves as being incredibly self-confident and independent and, yet, seek constant reassurance from friends and family when it comes to shopping, buying and making purchases. Whether shopping alone or in a group, they remain digitally connected contacting friends and family for advice or opinions via text, phone call or social media. While 57 percent surveyed said they tell their friends about their purchases, 44 percent prefer to "show off" their purchases, even if it's in subtle ways. Millennials are not alone -- of the 1,000 surveyed nationwide, the study revealed 85 percent of them live with a significant other, roommate or parent.

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In addition, it's not about major brands, but brands that have done their homework to connect with the Millennial consumer across multiple touch points -- to Friend them, so to speak. For example, when asked – unprompted – to name their top three favorites, 58 brands were mentioned five times or more. The survey results reflect what these 58 companies are doing right to connect with them.

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Millennials fully expect marketers to be upfront when it comes to answering questions, to practice what they preach, and build trusting relationships with them by using context-driven content spread across a variety of platforms. It's definitely not a one-hit ad crowd.

Norty Cohen, founder and CEO of Moosylvania said.

"For years, advertising served the role of reassurance and endorsement. That role has changed tremendously. Our job as marketers is to understand how dynamically the connectivity of the next generation of consumer is evolving. For example, forty percent of these Millennials have signed up to receive emails from their favorite brands. Think about that – the average person looks at their phone more than 150 times a day – and email is right in there with social media for this hit of self-assurance."

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They are definitely head over heels for certain brands they perceive to be as authentic as themselves. In addition to Facebook (59%), the top ways in which Millennials advocate for their favorite brands include telling their friends (57%) and shopping in-store (54%). Facebook is also a natural stopping-off point for Millennials to learn more about brands they love. In fact, the ubiquitous social media platform outranks brand websites almost two to one as the go-to for product discovery.

With regard to advertising, Millennials desire ad experiences that are more context-driven and spread across multiple platforms. Videos, product reviews and How-To's for many product categories resonate with this generation.

Methodology

The 2014 Moose Millennial Study Data surveyed 1,000 people about their buying, shopping and purchasing attitudes. The online study was finalized in January 2014 by Moosylvania and Great Questions, LLC.

Though that conclusion may be a surprise, it also offers savvy businesses the opportunity to get up to speed before their competitors catch up.

We need a rethink in the industry:

We need to understand that fusing offline and online isn't just about ensuring coherence between the two but also about recognizing that consumers have an integrated offline and digital experience in their day-to-day lives.

And we must do more to take advantage of that moment when a customer gets out her smartphone inside a store.

Interesting Stats

Nearly every customer will enter your store with a secret weapon in her pocket—a smartphone—and plenty of them will use that smartphone while shopping.

If you don't have a strategy in place to get them to interact with you while they are on their phone in your shop, then you're missing a fantastic opportunity—and most retailers are indeed missing that opportunity, according to a recent review of retailers' apps by Plastic Mobile.

Customers, on the other hand, want to be able to integrate mobile experiences while they're inside a shop, according to a recent survey by Walker Sands:

64% of survey participants say they have used their mobile device to research products while in a brick-and-mortar store.

52% say they would be more likely to shop at a retailer with an in-store navigation on a mobile.

59% said they would be more likely to shop at a store offering self-checkout via a mobile device.

How You Do It

So, what ways can you capitalize on consumers' in-store mobile use? Plenty.

Mobile optimization can be used to not only improve customer service but also increase loyalty and engagement.

In-Store Checkouts

Here is an idea that is starting more than a few murmurs within retail: A consumer can buy items without having to queue up at the checkout. Rather, by either using a mobile app on their own phone—or, more realistically at the moment, by approaching an assistant who carries a mobile device—shoppers can buy the item immediately, on the shop floor, via one-to-one service, without any queuing.

JCPenney staff are issuediPod Touches enabled with software that lets them check out items, and it's proving to be a huge success. It not only improves customer experience but also frees up shop assistants—an added efficiency for stores. Assistants can quickly help someone pay for an item and then be free to walk around the store doing necessary jobs rather than being tied to a static unit where they have to stand and wait for customers.

Social Media

Make your handles visible. At the very least, you should have your social handles/account names visible within the store, encouraging shoppers to like or tweet you.

If you can get a customer tweeting pictures to you of your products while they are in your store (with fully branded background) then you're in the ideal scenario, where consumers are doing the marketing for you. But you can go far beyond this scenario.

Offers and competitions. Offer in-store customers exclusive offers. Get your customers to Like you while they are in your shop and in return give them a 10% discount or a free item. Have exclusive voucher codes that are advertised only in store (maybe bespoke ones for each store, letting you loosely track social engagement by geographical area in a new kind of way); customers would then be able to use those voucher coders on their mobiles. Create a "selfie" area in a shop and run a social media competition. None of those are radically new ideas, but they will increase engagement and loyalty.

Rethink personalization. If you want to take cues from e-commerce and rethink personalization, why not consider offers that are tailored to people based on their online profile, but which get flagged to them only at the final stage, by a shop assistant, when they are buying from them on the shop floor?

There are possibilities for "signing in" a customer when an assistant uses a mobile device to check them out; if that action could flag a bespoke offer, which an actual human could tell them about, you've got a fusion of offline and online that couldn't be more personalized and personable.

Branded wallets. The relatively new concept of branded wallets is becoming popular. Branded wallets allow customers to check loyalty points and offers and to manage their respective accounts with retailers. It also gives retailers the opportunity to create bespoke offers and experiences.

The overall aim here is to increase loyalty and engagement. A mobile device gives you the opportunity to have a one-on-one conversation with a customer, and that means creating more than just a mobile presence.

Do It Now While It's Still New

JCPenney has been very vocal about its ambition to convert to a totally mobile checkout solution, but at the moment the idea still has enough newness to gain points just for the novelty of the experience.

We're just on the brink of really harnessing all this technology to make our lives more convenient, and yet you still have to deal with the mundane reality of queuing at checkouts on a busy Saturday afternoon.

Imagine that first experience of skipping a queue and paying while you're still browsing around the shop; it's a memory that will stick, and you're likely to remember the brand that first brought it to you.

The Burberry Flagship Store

One example of a store that has really invested in fusing offline and online is the Burberry flagship store on Regent Street. It has blended the digital and physical to the extent that mirrors inside the shop actually become personalized, interactive screens. The store is also used to screen live global events and gigs, or "choreographed audio-visual take-overs," as they like to call them.

Obviously that is a massive investment and not one that all retailers should be emulating, but it's this kind of store—where the company has really thought about how it can take advantage of both real-world and digital experiences—that retail is heading toward, and it's this kind of approach that other fashion outlets can learn from.

COMMENTARY: When consumers are looking for information on your brand, it is more likely to be on a phone or tablet, instead of a PC. The mobile device is king. At least that’s according to a report released recently by a mobile analytics firm which concluded that mobile device usage is on the rise.

The firm which compiled the report, Flurry, says that the average US consumer spends 2 hours and 42 minutes a day on a mobile device (compared to 2 hours and 38 minutes a year ago), and that amount of time continues to increase. It was only a few years ago that mobile browsing was seen as a fad. Now it is in full command of the room and taking no prisoners.

But there’s another conclusion from this report that is even more interesting… and surprising. And that is the solid dominance of apps over the mobile Web. For the average U.S. consumer, 86% of their time was spent using apps on a mobile device — or 2 hours and 19 minutes a day. Now compare that to usage of the mobile Web (i.e., what the report refers to as using a mobile browser). Consumers spent just 14% of their time (22 minutes a day) browsing mobile websites versus using an app.

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One fact which seems to be borne out by all of these statistics is that the main casualty seems to be the browser. If you want to do something on a mobile device, the phrase “there’s an app for that” is truer than it has ever been.

Think of it this way — if you have a smartphone device, when was the last time you actually used a browser for something? Email – app. Online banking – app. RSS feeds – app. Even Google has its own app.

It leads you to wonder: Is the browser fast becoming an ancient dinosaur in the world of mobile?

So what’s the lesson to take away from this? At the very least, make sure that your website is mobile-optimized. But what would be even better is if you were able to have an app professionally designed for your business. Then you would be capturing a chunk of that 86%.

05/04/2014

On Tuesday, Square updated its point-of-sale app with more robust features for merchants to manage their inventory, conduct business offline, and let customers order ahead online.

A Square spokeswoman told Fast Company.

"We're building [Square] Register to be a complete system, so businesses can do everything from the back office part of running a business all the way to the front and having to engage with customers."

Square will tack on an 8% processing fee for an order-ahead tool that lets customers pick up purchases. Square hopes such a feature will help small businesses, especially those in the food and beverage space, identify and acquire loyal customers. The company said the fee, much higher than its standard 2.75% swipe charge, is competitive because of the infrastructure involved: a system for merchants to create web pages and accept transactions online. In comparison, pick-up and delivery services that cater to restaurants, such as Seamless, Eat24, and Grubhub, charge vendors between 10% and 20% of an order, according to Square. The spokeswoman said.

"A small business traditionally wouldn't be able to do this. They wouldn't be able to afford or build these tools. We've made it really simple for them."

Another feature called Offline Mode will let venders make transactions without accessing the Internet, saving information from a card swipe until a connection is reestablished. The app has also been refreshed with inventory-tracking capabilities, which has been one of the biggest value-adds of competitor Shopify's point-of-sale register.

The spokeswoman said.

"The features speak to our customers and how our customers are growing. As they're growing, they need more functionality, and we want to give them what they need."

Earlier this month, Shopify, which offers a comprehensive set of tools for merchants to establish web stores and manage inventory online and offline, cut its credit card processing fees to take on Square.

COMMENTARY:

Square – How Did Square Grow So Quickly?

From Early Traction to Today’s Sustainable Growth Engine

By combining an elegant integrated payments system with a distinctive conversation-triggering piece of hardware, Square has disrupted the credit card payments establishment while making credit card processing more accessible to small businesses everywhere.

A cursory look at their growth would suggest that they succeeded on the back of an unfair advantage – founder Jack Dorsey’s celebrity status, but a deeper dive reveals a powerful and sustainable growth engine driven through a systems-based approach to product design and eye-catching hardware that fueled interest from anyone who saw it.

The Need for Square

As with most fast growth products, the Square story starts with addressing a widespread need with an effective solution that completely reimagines small business payments. Before Square, it was illegal for non-registered merchants to accept credit card payments. Registering was a costly and difficult process that most small business owners couldn’t afford. These business owners struggled with the reality that while most people carried plastic instead of cash, the costs and complexity of credit card processing made it impractical to accept credit cards.

“Jim McKelvey (co-founder of Square) was in an art fair and couldn’t sell a piece of glass because he couldn’t accept a credit card; so that was $2,000 lost.”– Jack Dorsey

Whether it was a local hot dog stand owner trying to increase profits, a college sorority fundraising for their organization, a philanthropic organization raising money for a good cause, or a politician raising money for their campaign, these groups often had no way of accepting credit card payments and relied solely on people carrying cash, which limited fundraising efforts and sales.

Early Traction

There is not much public information available on the early traction of Square, but Jack Dorsey’s own personal profile (as Twitter cofounder) cannot be understated when it came to attracting early customers and investors. Dorsey created a list titled, “140 Reasons Why Square Will Fail”, which he distributed to potential investors of Square. The list included counterpoints to each objection, which informed investors that he was prepared for any possible obstacle the new startup may face. “140 Reasons Why Square Will Fail” also served as a clever strategy to acquire new interest.

While Dorsey’s celebrity helped gain early tech press and investor notice, Square was designed to unlock credit card payments for the average small business–not the avid TechCrunch reader. To that end, Jack Dorsey’s celebrity is less important to lasting growth, compared to the obvious early benefits.

Dorsey also promoted his product through demonstrations held with potential vendors and investors of the company showing just how easy it was to use the product. By following the Apple iTunes/iPod model of developing an integrated hardware and software solution, Square was able to create a system that was easy to use, elegant in its design and completely new and remarkable from the other solutions on the market. By reimagining what it meant to take credit card payments, Square was able to catalyze word of mouth while unlocking untapped markets for new customers.

Despite early challenges, including questions about security, Square began to build credibility and momentum through partnerships with industry leaders and glowing reviews from users and reviewers alike. With high profile partnerships from Apple—where the company stocked and sold its reader for $10 in every store—to a strategic investment from Visa, Square showed their audience and the market that they were a serious new entrant with a product that brands they already trusted believed in. This gave Square the bonafides needed to make the leap from techset darling to a must-have for small businesses hungry for a solution to a long-unmet need.

Looking back at early traction it’s clear that there were 4 factors that drove growth:

An elegant hardware/software solution that reimagined the payment processing space, similar to Apple’s iTunes/iPod approach to digital music.

A business model that made payments accessible to small businesses who were previously shut out due to price and application process.

Early tech excitement based on Dorsey’s public profile to drive initial awareness.

Strategic partnerships that drove distribution and credibility fueling growth among their target customers.

Breaking Down Today’s Growth Engine

As Square has matured their growth engine has evolved. You don’t reach a $3.25 billion valuation on the back of any one hack. And sustaining growth tends to move away from early traction efforts to a more conventional marketing approach.

Square’s growth, however, continues to be driven by the core components of their hardware/software system, and their ability to continually innovate to make payments easier and more accessible for both consumers and small businesses alike.

Square’s growth engine can be summarized at a high level by the following four components:

Square solves a real problem that relates to the number one priority of their target customers – making more money. And they make it very easy and low risk to get started. Once a user activates an account on squareup.com, the company automatically ships out a free card reader to them within 7-10 business days. Signing up is hassle free and quick with very little friction, which complements the company’s goal to gain as many new users as possible.

An account with Square requires no contract, no monthly service fee, and doesn’t require a merchant service fee. As an added bonus, the credit card reader comes with a redemption code that allows new users to redeem $10, which is deposited into their bank account after registering the device.

Compare this to the traditional payment processor model which required a detailed application, a phone call audit, and an expensive equipment purchase and/or lease.

The Square phone app can be downloaded for free, turning any phone into a reader. The app is practical and easy-to-navigate. Even for non-tech savvy small business owners, Square is a breeze to use. Square customers who have a hard time using their iPhone have no problem taking a payment.

Wow customers with elegant integrated system

Square delivers on the initial promise of solving small business credit card challenges and then goes on to wow customers with an integrated solution that includes beautiful reporting; much of the system solves needs the customer didn’t even know they had (after nailing the obvious problem).

Square’s applications for small businesses make it easy to setup and configure point of sale systems on an iPad, can provide rich insights to help business owners make the most of business opportunities, and help build loyalty through two-way communication between the business app and consumers using Square.

This integrated approach to payments goes far beyond just taking payments. Take business intelligence: Square gives small business owners access to data they never had before. What’s the most popular drink on the menu? The busiest day? And other data that lets small business act more like big business.

Customer loyalty is another facet of the system. Square’s Wallet allows users to buy from merchants who accept Square without having to physically take anything out of their pockets to pay (the app has all of the customer’s credit card information saved). A customer can simply walk into the store, say his or her name, and the merchant can pull up his or her account profile and picture through geo-fencing technology.

This technology detects when a customer is nearby a merchant-enabled store. The app also features the ability to find location nearby that accepts Square and provides customers with information such as contact info, menus, coupons, photos, and reviews of said merchants.

All innovations around payments to remove friction and delight their customers—business owners and shoppers.

Beautiful highly visible hardware sparks questions

Square spent the time and resources to make the hardware component of their solution interesting and even beautiful to the eye. Compared to other credit card terminals, it’s a work of art.

This visible unique differentiator sparks conversations with customers. People naturally ask “Wow, what is that thing attached to our iPhone?” The experience of signing with your fingers and having the receipt mailed to you is convenient and amazing in itself. It’s completely unlike any other way to pay.

The company keeps pushing forward with new technology such as the Square Register application which turns an iPad into a powerful, point-of-sale system. The app supports a traditional cash drawer and has the ability to print physical receipts with a compatible receipt printer—a smart evolution that acknowledges that cash still is an important part of small business commerce.

With each innovation in hardware, the striking style and attention to detail and remarkable experience continues the conversation and creates more visibility for the business. For example, the new Square Standspins completely around so that the customer signs on the same screen that the clerk uses.

While efficient, it also creates a novel moment of surprise and delight as something completely unexpected from traditional purchase transactions. This delight creates goodwill, word of mouth, and customer satisfaction both for the store’s customer and Square’s.

Raving fans advocate benefits of solution

Business owners that are asked about Square are happy to rave about the product. It makes them look smart and hip to their customers and their peers. Square’s hardware design elevates the small business brand and provides delightful elements to their own customers’ experiences.

This positive word of mouth creates a flywheel of momentum for the business. And the more people that use and interact with the product, the more their ecosystem grows. More small business owners get the reader. Their customers download the Square app to make payments more seamlessly. Those customers tell other business owners to install Square, and the beat goes on.

As more people get added to the ecosystem their momentum gets stronger. New partnerships with companies like Starbucks will put Square in front of millions of new users, driving that flywheel ever faster.

When compared to Intuit or PayPal, both who recently released credit card adapters for iPhones, the positive word of mouth and delightful experiences that generate it are powerful barriers for competition to overcome.

The Remaining Pieces of Square’s Growth Engine

This article contains a lot of data interpretation and speculation about the engine that is driving growth for Square. Speculation creates debate and dialog, which are two of the main goals for these analyses. Our hope is that this document will will spark a rich discussion where we can further break down the publicly available information to build the definitive understanding of Square’s unique growth engine.

With your help, we’ll create the best case history of how Square grew, which will hopefully help future hardware entrepreneurs discover their own growth engine faster, leading to more successes for promising companies.

We hope that this analysis will help new hardware startups identify some of the levers that they can test in their own growth strategies. By going beyond the obvious nature of Jack Dorsey’s fame, to a more complete understanding of their systems thinking and credibility building with their target audience, we hope that hardware entrepreneurs will find takeaways and new insights that will fuel their growth.

Courtesy of an article dated April 29, 2014 appearing in Fast Company and an article dated October 11, 2013 appearing in GrowthHackers

02/06/2014

The size of a social network often determines its usefulness as a marketing tool.

The fact that Facebook is still used by more than 70 percent of US adult and that Pinterest became the fastest growing network after a few years of existence, it was only natural that marketers would use the platform for advertising and marketing.

However, social media is more than just a place for ads. More important than the size of a social network is how the users engage with the brands they follow on that network. Recent research has shown that social media excels in producing meaningful engagement and product discovery.

This post will examine some of the new studies that show the growing value of social commerce for retailers in 2014.

“Social Commerce has rapidly changed from ecommerce transactions on social networks to focus on empowering people to discover new product ideas from each other while they shop with the brands they love. The launching of social discovery and curation solutions this year by some of the world’s largest retailers, Toys R Us, eBay, Walmart, Target, and Amazon, is a strong indication that on-site social discovery has gone mainstream.”

Social sharing options on retail ecommerce sites are a key featuring driving product discovery. Adding a “Pin It” or “Like It” button to ecommerce sites greatly increases the web traffic to those pages. Pinterest’s popularity with marketers is growing because it allows consumers to discover new products from brands they like or they're from the people they follow.

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During the time period examined, more retailers used the Pinterest Pin (62 percent) than Facebook’s equivalent ‘Like’ (59 percent). However, according to the report, “even though the Facebook Like button is less prevalent on the product page than the Pinterest Pin It button and Tweet button, customers are sharing products more often on Facebook than on Pinterest or Twitter.”

It is likely that Pinterest will continue to grow in importance as more retailers decide to focus on the image-friendly Pinterest that can also brings in more money per customer on average. According to data from IBM, on Christmas Day 2013, shoppers referred to retailers by Pinterest spent $109.93 per customer on average compared to $60.48 from the average consumers following a trail from Facebook. On the other hand, in total, Facebook made produced more sales due to the volume of traffic and the fact that they converted visits into sales 3.5 times more often than Pinterest.

More than half of the companies in the 8thBridge study indicated that they planned to redesign their websites in the coming year to improve social commerce. Whenever they planned on doing it, 86 percent of the companies said they would include social sharing options in any future site redesigns. Similarly, by the end of 2014, more than half of the companies will be using social logins that make it easier for the consumer to log into the ecommerce site and to share content they find with their friends.

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The researchers concluded that, “the results show that the most effective social media marketers are not only present on the social networks and drive customer engagement, but they also have great website social experiences that incorporate customer curation (or collections), crowd-sourced discovery and social rewards.”

It’s important for business owners and marketers to move beyond old ways of thinking when deciding how to use social media for marketing. Businesses that simply use social networks as platforms to post marketing slogans are missing out the massive opportunity that a highly interactive and heavily connected social network present.

As the data from 8thBridge and the IBM Christmas Day analysis show, there is a lot of money out there for marketers and entrepreneurs that figure out how to make social commerce work for their business.

COMMENTARY: The third annual Social Commerce IQ (SCIQ) report analyzes the social commerce strategies of 872 retailers. The number of retailers analyzed this year was almost double the number analyzed in last year’s report, to include nearly all of the brands from companies in the Internet Retailer 2013 Top 500 Guide and additional brands Internet Retailer determined were up and coming.

Wade Gerten, CEO of 8thBridge, Inc. said.

“Social Commerce has rapidly changed from ecommerce transactions on social networks to focus on empowering people to discover new product ideas from each other while they shop with the brands they love. The launching of social discovery and curation solutions this year by some of the world’s largest retailers, Toys”R”Us, eBay, Walmart, Target, and Amazon, is a strong indication that on-site social discovery has gone mainstream.”

7 social platforms were analyzed for the 872 retailers including: Facebook, YouTube, Twitter, Instagram, Pinterest, Google+, and Vine. 4 areas were taken into account when calculating the SCIQ scores: brand awareness on social networks, social upstream traffic, website social lift, and Social CRM.

The top 25 companies identified in the SCIQ are:

Free People

Lancome

Smashbox

Lolly Wolly Doodle

Plndr

Target

Bourbon & Boots

Toys”R”Us

WWE

ModCloth

Fab.com

BodyBuilding.com

Sears Holdings

Diamond Candles

TheKnot.com

American Eagle Outfitters

Birchbox

Zappos.com

BucketFeet

Etsy

Vans

ShoeDazzle

CCS

JustFab

Vat19.com

Findings Included:

Pinterest’s Pin It button overtook Facebook’s Like button on the product page

86% of retailers planning site redesigns for 2014 are planning to add social shopping features

Engagement on Facebook brand pages was down 27%

Eight of the companies in the Top 25 list are among the Top 50 in the Internet Retailer 2013 Top 500 Guide

12/17/2013

Jim Gold has a sweater he’s worn a hundred times, and it still looks new.

It’s a classic V-neck with a ribbed hem and cuffs.

Most guys’ wardrobes include a couple of these pullovers, usually one in navy or gray. It’s a piece that gets a lot of wear over the fall and winter. After a year or two, the pilings get bad enough that a wife, mother or close friend replaces it with a new one in a gift-wrapped box at Christmas.

Customers invited to a fashion show luncheon at the Neiman Marcus store in NorthPark Center left with fresh flower centerpieces. (Click Image To Enlarge)

Gold, who is stores division president of Dallas-based Neiman Marcus Group, says his sweater is at least 8 years old and doesn’t need replacing. The sweater is cashmere, a Brunello Cucinelli, that’s made in Italy and retails at Neiman Marcus for $645.

Plenty of cashmere sweaters can be bought elsewhere for $99 or less, he said, but after you wear one four or five times, it will start to look shabby.

Gold is building a case for luxury, a term he says is batted around too loosely these days.

Gold said.

“Too many companies and brands claim to be in the luxury business. They aren’t following the strict definition.”

At Neiman Marcus, the litmus test is quality, scarcity and longevity — a product that can stand the test of time, Gold said. “That’s our core business.”

Gold said.

“An important part of what we do every day is to educate people about our products. Neiman Marcus merchandise doesn’t cost more because we unilaterally decide to charge more. Quantities are in smaller numbers because there’s more craftsmanship and a whole lot of talent behind creating things.”

The core Neiman Marcus customer already knows that.

But a broader base of customers is evolving, and some shoppers are a harder sell, said Pam Danziger, president of Unity Marketing, a Pennsylvania-based research firm that focuses on the affluent shopper.

Danziger said.

“I would disagree with that value proposition. I don’t think the consumer is buying that story. You can still buy a cashmere V-neck sweater that’s just as good at $300, and there are more premium brands out there now, like a J.Crew, that are fine quality and last a long time.”

A Brunello Cucinelli cashmere V-neck sweater was selling for $645, and a sweat shirt for $1,275 at the Neiman Marcus NorthPark last week. (Click Image To Enlarge)

Danziger believes there’s been a shift in the makeup of the luxury consumer market. Based on her ongoing tracking study of affluent Americans, households with income levels of $100,000 to $249,999 — known as the Henrys, for high earners, not rich yet — aren’t playing as big a role in luxury spending as they did before the recession.

Danzinger said.

“They shop everywhere, and they view themselves as middle class. They shop at Nordstrom and Neiman Marcus, but they shop widely and they are the heavy lifters in the overall economy. They also shop at J.C. Penney and Costco and Wal-Mart and Macy’s and the dollar stores, and on occasion they shop at Neiman Marcus.”

The Henry factor

The Henrys, an acronym coined by Fortune magazine writer Shawn Tully, are a key demographic for luxury retailers because future ultra-affluent customers usually start out as Henrys.

The top 2 percent of the ultra-affluent households, with incomes above $250,000, and the top 1 percent, with annual incomes of more than $380,000, don’t have huge buying power as a group because there aren’t as many of them, she said. There are about 2.9 million in those two categories, and 1.2 million are in the 1 percent.

The Henrys have big numbers, with about 21.6 million U.S. households.

In late 2010 and early 2011, Danziger predicted that the post-recession U.S. market could no longer support the large number of stores that resulted from the pre-recession boom in luxury.

This year and last year, Saks Fifth Avenue and Barneys New York closed multiple stores in Texas and throughout the U.S. Last summer, even Neiman Marcus closed a full-line store, its only one in Minneapolis.

The Neiman Marcus children's department includes unique gifts such as a Lamborghini battery-operated kid's-size black convertible for $395 and wooden doll houses priced at $250 and $350. (Click Image To Enlarge)

Another post-recession year is coming to an end.

With just weeks left in the holiday shopping season, Americans, on average, now estimate they will spend $740 on Christmas gifts, according to a poll from Gallup on Thursday. That is in between consumers’ more positive October estimate of $786 and their less positive November estimate of $704.

The December estimate puts the season’s increase in the range of 2.3 percent to 2.7 percent, below the industry’s estimate from the National Retail Federation of a 3.9 percent increase.

That means that as a whole, Americans are operating with more of a recessionary mind-set than one inspired by the soaring stock market or recent reports of improved economic growth, Gallup said.

Research and consulting firm Bain & Co. estimates that the U.S. luxury personal goods market, which doesn’t include cars, boats and travel, will grow 7 percent this year to $95 billion. Bain also forecast that worldwide holiday sales of personal luxury goods will be up a modest 2 percent, but it didn’t break out the U.S.

Unity Marketing polled 1,208 affluent consumers with average household income of $267,100 in early October about expectations for future luxury spending over the next 12 months. Only 20 percent of those surveyed plan to spend more, down from 31 percent a year ago, Danziger said.

A red-dyed chinchilla stole is priced at $9,000 at Neiman Marcus' NorthPark store in Dallas. (Click Image To Enlarge)

Also at Neiman’s …

While Neiman Marcus continues to cater to the wealthiest consumers, Gold said there are plenty of ways that people with lower incomes can experience the store, by buying a $25 lipstick or a $200 pair of jeans that really fit.

Gold said.

“It’s like driving a Porsche. Once you do, you don’t want to drive a Volkswagen.”

Steven Dennis, founder of SageBerry Consulting and a former Neiman Marcus senior vice president, said there’s more complexity to the luxury consumer than retailers like to talk about.

Dennis said.

“If you grew up in a middle-class family, you went to someplace like Macy’s for your nice stuff, then you’re working for a hedge fund or you become a doctor and you can step up. It’s not obvious to you right away why you should spend $4,000 for a nice suit.”

Gold says Neiman Marcus will continue to cater to the highest-end customer in the world. But for most who aren’t in that group but have the good fortune to come into some money, say with a new job starting out that pays $75,000, there are still plenty of ways to experience Neiman Marcus, he said, “if we’re doing our job right.”

By the way, here's the Neiman Marcus Christmas Book for 2013.

Click To View The Neiman Marcus Christmas Book for 2013

Follow Maria Halkias on Twitter at @MariaHalkias.

COMMENTARY: According to research from the private wealth division of Citibank, the average shopper at Neiman Marcus has household income of $250,000 per annum. The average Nordstrom customer, in contrast, earns $100,000 each year.

That means the average Neiman Marcus customer earns roughly $20,834 before taxes and, with standard deductions, probably $15,000 in take-home pay each month. The average Nordstrom customer, in contrast, earns $100,000 each year, or $8,334 gross per month, which results in $6,000 net after tax deductions and payments.

Both shoppers are considerably higher than the $50,000 annually earned by the average American household and the $35,000 earned by the average Wal-Mart shopper. Put another way, if you shop at Nordstrom you likely earn 2x the average American family and if you shop at Neiman Marcus, you likely earn 5x the average American family.

If you are a doctor, an attorney, a wealthy business owner, or a bank president, your wardrobe is incredibly important. It instantly conveys to prospective clients that you are successful and good at what you do. It is a symbol that instantly communicates without words. Furthermore, your wardrobe is going to last probably an average of 3-5 years rolling. That means that you could amortize the cost in accounting terms.

If you compare Neman Marcus and Whole Foods customers, you will find some similarities and some succinct differences between them.

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Courtesy of an article dated December 14, 2014 appearing in the Dallas Newsand an article dated December 5, 2010 appearing in Joshua Kennon

08/18/2013

A young Millennial Mobile Shopper checks for prices and reviews using her smartphone (Click Image To Enlarge)

We already know that mobile shopping is growing, in step with the growing group of smartphone and tablet owners, but what kinds of activities are mobile shoppers pursuing? Considering the varying mobility between tablets and smartphones, it’s little surprise that mobile shopping activities often depend on which device is used as much as where it’s being used.

U.S. mobile shoppers use their devices most frequently in the home, according to Nielsen, as more than two-thirds of smartphone shoppers and four-out-of-five tablet shoppers do—sometimes while watching TV. While shopping on their mobile devices, tablet owners are more active with product research (59%) and are more likely to purchase physical items (38%) than smartphone shoppers (24%).

Smartphone shoppers are more active outside the home, but they are more likely to do certain mobile shopping activities from home, such as reading reviews and using social media to make a comment on a purchase. Even though smartphones and tablets are made to be mobile, some mobile shoppers never leave the couch while they’re shopping, as 95 percent of tablet shoppers and 72 percent of smartphone shoppers who make a purchase with their device do so at home, although tablet users are more likely to make a purchase overall.

For mobile shoppers who make a purchase in a retail store, smartphones are constant companions and the in-store device of choice for most. En route to the store, 70 percent of smartphone shoppers use a store locator to plan their shopping trip. Once they arrive at the store, 37 percent stay organized using lists while shopping on their phones. Savvy mobile shoppers use their devices to check prices, and the majority of smartphone (63%) and tablet (53%) owners search and scan their way to savings, though more smartphone owners do this while in a retail store. And the savings continue at the checkout lane, where smartphone shoppers are more likely to use their devices for mobile coupons (34%) and for payment (23%).

But the experience doesn’t end at the checkout line. When mobile shoppers get back home, they pick up their tablets to track and share their shopping experience on the Web. Twenty percent write comments on social media and 16 percent use their tablets to write reviews of their purchases. Among tablet shoppers, 17 percent said they follow up on their purchase by looking up information on a complementary product. And for those that never leave home to shop, the majority of smartphone (55%) and tablet (52%) shoppers said they use their devices to track the progress of their online orders.

COMMENTARY: The Monetate Q1 2013 Ecommerce Quarterly gives insight on smartphone vs tablet vs desktop share of audience for large Ecommerce brands. The alert linked to above gives more information on their volume and some add-to-cart / basket data for referrers also.

This source is useful since it’s a regular survey showing the growth in use of mobile site visitors. You can see that tablet and smartphone use nearly doubled in the year based on 500 million visits for these retail clients (see link above for methodology). Mobile share is now around 25% on average.

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This data also enables you to drill down to see usage by device type, for example iPad is still the dominant tablet, but Kindle Fire and Android tablets now account for 10% of tablets.

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If you’re creating a business case for mobile optimised sites as explained in our mobile marketing strategy guide, this data is also valuable since it shows the variation in conversion rate by mobile type. In Q1 2013 tablets exceeded traditional desktop devices for conversion rates for the first time suggesting people are increasingly comfortable with the experience of buying on tablets.

This suggests smartphones are more of browse or research platform rather than a buy platform since many of the large retailers featured in this survey will have mobile optimised sites.

We reported comScore data in May 2012 that showed that on smartphones 82% of mobile media time is via apps. This is a key insight as companies decide whether to develop mobile apps or create mobile device specific apps. In April 2013 mobile analytics vendor Flurry released a useful summary of category of app usage across smartphones and tablets and similarly to the previous report it shows that app usage dominates browser usage as they put it: It’s an App World. The Web Just Lives in It. You do have to be careful about interpreting this though, since Facebook, games and utility apps will naturally have the greatest time spent and browser use is still significant by volume if not proportion.

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Courtesy of an article dated August 12, 2013 appearing in Nielsen and an article dated June 10, 2013 appearing in Smart Insights

08/06/2013

Trekking to IKEA is often an exercise in futility. The armchairs and bookcases never look as perfect in your cramped apartment as they do in the color-coordinated showrooms. After 15 minutes, you're tired and overwhelmed and you can't remember what you even came for.

Simply place the catalog in the spot where you're considering adding a new piece of furniture, scan the catalog with the augmented reality app on your mobile device and select the desired item.

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The augmented reality feature then projects the item into your home by layering it over a real-time view of your room captured through your device's camera. The app also lets you experience the scale of the objects in relation to your living space, as you can see in the video above.

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IKEA's 2013 catalog included smartphone integration, but only featured videos and photo galleries that could be accessed via an app by scanning the catalog's pages.

This year's catalog also includes several highly anticipated new releases, such as the Lövbacken table, a revival of the company's original flat-pack table produced in 1956.

The Lövbacken side table, originally sold by Ikea as the Lövet in 1956, will be making a come-back into stores in August (Click Image To Enlarge

Do you think IKEA's concept for an augmented reality catalog will catch on with other furniture sellers? Let us know your thoughts in the comments.

COMMENTARY: I have seen augmented reality apps used in the fashion retail industry for virtual reality dressing rooms. Users can see how a piece of apparel looks on them without having to go to the change room. One of the issues that I see with the app is the lighting differences between the IKEA furniture item and the room where that item will be placed. Subtle changes in lighting can make the item look out of place or mismatched with other furniture in that room. However, I do see some merits for this type of app. I don't know if scale is taken into consideration, or how it is handled, so simply superimposing an item in a room does not anser the question, whether there will be sufficient room for that item or how it will affect the overall room.